NewLink, whose subsidiary licensed commercial rights to the rVSV-EBOV vaccine in 2010, said it would receive $50 million plus royalties from Merck.

Large late-stage trials of the product could begin early next year, said Merck, the No. 2 U.S. drugmaker and one of the world's biggest makers of vaccines.

Merck, which will be able to speed up and significantly boost production, will take over development of the vaccine and any follow-on products.

The Public Health Agency of Canada, which originally developed the vaccine, will retain non-commercial rights to it.

The deal between Merck and NewLink, a tiny biotechnology company based in Ames, Iowa, comes as other drugmakers are also racing to test and scale up production of treatments and preventive vaccines for Ebola, which has killed more than 5,400 people this year.

It is the worst Ebola outbreak on record. Guinea, Sierra Leone and Liberia account for all but 15 of the deaths.

The Walter Reed Army Institute of Research and the U.S. National Institute of Allergy and Infectious Diseases, part of the National Institutes of Health, are conducting early-stage trials of the NewLink vaccine. The trials involve healthy volunteers and are testing whether the vaccine is safe and provokes a protective immune response.

Should those Phase I studies prove favorable, the NIH plans to begin large late-stage trials early next year. The World Health Organization is also coordinating early-stage trials in Switzerland, Germany, Kenya and Gabon.

In a regulatory filing on Monday, NewLink said Merck would pay it $30 million upfront and $20 million once larger formal trials begin. The company will also be eligible to receive royalties on sales in certain markets.

Shares of NewLink were down 4.3 percent at $33.81 in morning trading, while Merck fell 0.5 percent to $59.34.

Rival drugmaker GlaxoSmithKline Plc is developing its own Ebola vaccine with the NIH and plans to build a stockpile of thousands of doses for emergency deployment if results are good. (Additional reporting by Vidya L Nathan in Bangalore; Editing by Lisa Von Ahn and Siddharth Cavale)